Most non-U.S. stock markets posted fourth-quarter losses in U.S. dollar terms due to the further weakening of non-U.S. currencies, particularly the euro and the yen. The yen declined more than 8% versus the dollar, and the euro and British pound sterling each fell about 4%. The appreciating U.S. dollar detracts from returns for dollar-based investors in foreign markets. Developed Asian markets generally outperformed European markets for the quarter, while Nordic markets fared worst.
The International Discovery Fund returned −0.73% in the quarter compared with −3.31% for the S&P Global ex-U.S. Small Cap Index and −3.33% for the Lipper International Small/Mid-Cap Growth Funds Average. For the 12 months ended December 31, 2014, the fund returned −0.43% versus −3.11% for the S&P Global ex-U.S. Small Cap Index and −5.67% for the Lipper International Small/Mid-Cap Growth Funds Average. The fund's average annual total returns were −0.43%, 10.06%, and 9.13% for the 1-, 5-, and 10-year periods, respectively, as of December 31, 2014. The fund's expense ratio was 1.23% as of its fiscal year ended October 31, 2013.
For up-to-date standardized total returns, including the most recent month-end performance, please click on the Performance tab, above.
Current performance may be lower or higher than the quoted past performance, which cannot guarantee future results.
Share price, principal value, and return will vary and you may have a gain or loss when you sell your shares.
The International Discovery Fund charges a 2%
redemption fee on shares held 90 days or less.
The performance information shown does not reflect the deduction of the redemption fee;
if it did, the performance would be lower.
The portfolio seeks long-term capital appreciation primarily through investment in small-cap companies traded in developed and emerging markets, with faster earnings growth and reasonable valuation levels relative to market/sector averages. We have a pragmatic and adaptive style that has a "go anywhere" ethos and a portfolio that is constructed to diversify country, currency, sector, and style risk as much as possible. In the quarter, the portfolio's information technology holdings contributed the most to returns, while consumer staples positions were the largest detractors.
Valuations internationally never rose as high as those for U.S. small-caps, and thus, we do not face the same multiple headwind. With a few notable exceptions, earnings as dictated by middling (at best) economic conditions have been a drag. However, liquidity is plentiful, money is cheap, corporate balance sheets are strong, and the M&A cycle is at our backs. If we can continue to find superior growth stocks and buy them early or in a contrarian way, we believe we will be well positioned to add value.